Why should you open a bank or brokerage accounts abroad? Because it gives your investment portfolio higher returns and lower risks. How?

(6) After you have your foreign bank or brokerage accounts opened, we can help with constructing a global investment portfolio.

What is our investment philosophy?

First and foremost, we are strongly encourage wide diversification in currencies,bonds, and stocks. As we already saw in "Investing Abroad", diversification can increase the financial returns and decrease the risks of a portfolio simultaneously. Within stocks, we are fans of indexed funds (rather than common stock) and buy and hold strategies. Why?

Originally developed by 2013 nobel laureate Eugene Fama, one of the main theories in financial economics is the Efficient Market Hypothesis (EMH). According to this theory, stock prices are adjusted to reflect all information available without delay. So, it is impossible (even for professionals) to constantly beat the market. Although there is still strong debate among academics in the topic, along with remarkable contributions of several individuals such as Robert Shiller and Richard Thaler, we believe that the EMH remain the fundamental idea for investors trying to persistently generate financial gains out of investments.

Exchange-traded funds (ETFs) are baskets of securities that can be bought like a common stock but often track an specific index. For example, the S&P 500 index is based on the market capitalizations of the 500 largest companies having common stock listed on the NYSE or NASDAQ. The S&P 500 ETF follows this index, which is great indication of how the US economy is doing. When the US stock market is going down, the S&P 500 tends to go down. When the US stock market is going up, the S&P 500 tends to go up. Therefore, the first major benefit of ETFs is that they do not require any firm specific knowledge. You can bet in much larger samples, like industries, countries, or groups of countries (e.g. BRICS, EU, ASEAN, rich states, emerging markets). So, if one or two firms present bad results, that is not a problem as they would represent a small percentage of the asset you bought. If you had bought stocks from these exact companies, however, your earning could be on the negative side. Nowadays, not only top academics but even many of the most renowned investors, such as Warren Buffett, have publicly advised amateur investor to invest in indexed assets.

Moreover, if the Efficient Market Hypothesis is right, investors trying to beat the market will fail to do so in most of the times. Strong empirical evidence suggests that this happens. Approximately, 70% of actively managed mutual funds have regularly been outperformed by broad stock market indexes in the US, which is the probably the country with the most skilled individuals working in the finance sector. In fact, an old academic study, by Michael Jensen (now at Harvard Business School), has studied a large amount of mutual funds through a long period of time and finds that they do not even beat their benchmarks, on average, after accounting for their fees. In the last decades, this study has been updated thousands of times and the results continue to mostly hold. That is why we usually do not recommend mutual funds for our clients.

More or less for the same reasons, we do not encourage our clients to constantly buy and sell assets. We recommend them to buy and hold. First, the prices are already reflecting all information available, so you should not be able to persistently buy and sell assets to earn more than the market in the long run. Second, there are always fees involved in buying and selling assets. So, the less you trade, the higher tend to be your financial earnings.

IMPORTANT: THERE IS NO TAX OR INVESTMENT STRATEGY THAT IS CLEARLY BETTER. IT ALL DEPENDS ON YOUR GOALS AND RESOURCES.

For example, are you willing to move abroad? If so, where? How long do want to stay in each place? What is your annual income? How much money are you willing to invest? Do you want short term gains or long term investments? What is (are) the source(s) of your income? How much taxes do you pay annually? Do you want to decrease your tax duties or completely remove it? Do you feel like you want to pay some taxes even if you do not need to? What is your citizenship? Do you have multiple citizenships?​Depending on each of these answers the best investment/tax strategy for you will differ. In order to see what option is best for you and to help with the implementation of the strategy feel free to reach out to us.​You do not need to be rich to create a global investment portfolio. Most of the bank and brokerage accounts we open do not have minimum initial deposit or maintenance fee. Thus, you can invest as much as you want or even leave the accounts empty until you have enough capital or interest to invest abroad.